Photo courtesy of The Somerset County Prosecutor's OfficeA 2008 photo of Eric Criss, who authorities say was the mastermind behind a payroll and forgery scheme. A judge today dismissed two charges in the original 407-count indictment against Criss and 14 others for the scam.

A Superior Court judge today refused to dismiss all but two of the charges filed in an interstate racketeering, money laundering and conspiracy case in Somerset County.

Last year's 407-count indictment was the largest in the county's history, and capped a six-month investigation by the Somerset County Prosecutor's Office dubbed "Operation Stop Payment."

Eric Criss, 45, of South Orange is accused of being the mastermind behind the sophisticated payroll and forgery scam in which a crew of runners cashed bogus checks from dozens of legitimate entities, defrauding banks in five states and reaping more than $600,000, according to the state.

Criss, two of his sons, a stepdaughter and her husband were among 15 people named in the indictment handed up in May 2008. Seven defendants already pleaded guilty.

Criss's attorney, Barbara Ungarof New Brunswick, filed a motion to dismiss the indictment, as did public defender Robert Gaynor, who represents one of the alleged runners, Danielle Hoagland, 28, of Easton, Pa.

Attorneys for the remaining clients joined in the motion. The lawyers and the defendants appeared Wednesday before Superior Court Judge Robert Reed in Somerville for a hearing. Assistant Prosecutor Matthew Murphy is handling the case for the state.

In his decision today, Reed agreed to dismiss two of the money laundering counts against Criss and his relatives. According to the judge, the state failed to brief the grand jury on the elements of the law governing that crime. Murphy, who presented the case to the grand jury, also did not interweave the law into his questions during testimony before the grand jury, he said.

Criss was charged with 23 of the 407 counts, including some of the most serious offenses: second-degree racketeering, leader of an organized crime network and money laundering.

In court papers and during Wednesday's hearing, Ungar zeroed in on the first five counts against her client, and said the state failed to present the minimum amount of evidence needed to support a case for those crimes.

Money laundering is complex, Ungar said in court, and the state never gave grand jurors any explanation of the law regarding the crime. "There really is no excuse, except for the prosecutor forgot," she said. "They were not guided as to what money laundering was."

During the hearing, Murphy insisted the grand jury has a very limited purpose, and as long as they receive some evidence supporting an element of a crime, that's sufficient, Murphy said.

In Criss's case, the grand jury heard testimony of how he used proceeds from the illegal operation to accumulate assets, including a townhouse and several vehicles.

"This is a man who had no lawful income," Murphy said. The grand jury also heard statements explaining Criss took 50 percent of the proceeds from the bogus checks.

Reed dismissed counts three and five of the indictment, and Murphy today said the state would again present those counts to a grand jury. "We expect an indictment within the next 10 days," he said.

Ungar today re-emphasized the charges against her client are not simple ones.

"The racketeering and money laundering statutes are complicated," she said. "There are various aspects that have to be proven and my client denies (all) of the allegations."

Hoagland was not charged with money laundering, but she was indicted on 91 counts, including second-degree conspiracy to commit theft by deception. Gaynor said his client voluntarily spoke with an investigator from the prosecutor's office, while the attorneys discussed whether she would cooperate with the state. A month later, she was indicted.

"They held back, judge," Gaynor said in court, accusing the prosecutor's office of misleading his client.

"Nobody was holding back," Murphy said. The state had reams of information about when and where she cashed checks, including numerous surveillance photos of the young woman, well before they interviewed her, he said in court today.

The judge disagreed with the argument that Hoagland's cooperation was used against her. The interview appears to duplicate information the state had amassed, Reed said in his decision.

"Ms. Hoagland was already arrested, with substantial evidence compiled against her, and had made prior statements to the police with no understanding they would not be used against her," Reed wrote. "An offer to cooperate with the state does not automatically taint future investigation."